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Discover Financial Services (NYSE: DFS) today reported net income of
$720 million or $2.05 per diluted share for the third quarter of 2018,
as compared to $602 million or $1.59 per diluted share for the third
quarter of 2017. The company’s return on equity for the third quarter of
2018 was 26%.

Commenting on the quarter's results, Roger Hochschild, CEO and president
of Discover, said, “Consistent execution against our strategic
priorities enabled us to deliver strong loan and revenue growth once
again this quarter. By leveraging the strength of the Discover business
model, in combination with our disciplined approach to credit, we
continued to generate profitable growth and exceptional returns."

Segment Results:

Direct Banking

Direct Banking pretax income of $923 million in the quarter increased by
$56 million from the prior year driven by higher net interest income,
largely offset by an increase in the provision for loan losses and
higher operating expenses.

Net interest income increased $173 million, or 8%, from the prior year,
driven primarily by loan growth. Net interest margin was 10.28%, flat
versus the prior year. Card yield was 13.06%, an increase of 23 basis
points from the prior year as a result of increases in the prime rate,
partially offset by a change in portfolio mix and higher interest
charge-offs. Interest expense as a percent of total loans increased 44
basis points from the prior year, primarily as a result of higher market
rates.

Other income increased $20 million, or 5%, from the prior year, driven
by higher discount and interchange revenue.

The 30+ day delinquency rate for credit card loans was 2.32%, up 18
basis points from the prior year and 16 basis points from the prior
quarter. The credit card net charge-off rate was 3.14%, up 34 basis
points from the prior year but down 20 basis points from the prior
quarter. The student loan net charge-off rate, excluding PCI loans, was
1.19%, down 33 basis points from the prior year. The personal loans net
charge-off rate of 4.09% increased by 90 basis points from the prior
year. Net charge-off rates were generally higher because of
supply-driven credit normalization and the seasoning of recent years'
loan growth.

Provision for loan losses of $742 million increased $67 million from the
prior year due to higher net charge-offs, partially offset by a lower
reserve build. The reserve build for the third quarter of 2018 was $100
million, compared to a reserve build of $148 million in the third
quarter of 2017.

Expenses increased $70 million from the prior year as a result of higher
employee compensation, marketing expenses and information processing.
Employee compensation increased as a result of higher average salaries
and higher staffing levels. Marketing expenses increased as a result of
higher investment in new account acquisition. Information processing
increased due to investments in infrastructure and analytic capabilities.

Payment Services

Payment Services pretax income was $44 million in the quarter, up $8
million from the prior year, due to higher revenue driven by transaction
volume growth.

Payment Services transaction dollar volume was $58.7 billion, up 14%
versus the prior year. PULSE transaction dollar volume was up 14%
year-over-year, which reflects the impact of new issuers on the network
as well as strong growth from existing issuers. Diners Club volume
increased 5% year-over-year driven by continued strength of newer
franchise relationships. Network Partners volume increased by 34% from
the prior year driven by AribaPay.

Share Repurchases

During the third quarter of 2018, the company repurchased approximately
6.0 million shares of common stock for $460 million. Shares of common
stock outstanding declined by 1.7% from the prior quarter.

Conference Call and Webcast Information

The company will host a conference call to discuss its third quarter
results on Thursday, October 25, 2018, at 4:00 p.m. Central time.
Interested parties can listen to the conference call via a live audio
webcast at https://investorrelations.discover.com.

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment
services company with one of the most recognized brands in U.S.
financial services. Since its inception in 1986, the company has become
one of the largest card issuers in the United States. The company issues
the Discover card, America's cash rewards pioneer, and offers private
student loans, personal loans, home equity loans, checking and savings
accounts and certificates of deposit through its direct banking
business. It operates the Discover Global Network, comprised of Discover
Network, with millions of merchant and cash access locations; PULSE, one
of the nation's leading ATM/debit networks; and Diners Club
International, a global payments network with acceptance in 190
countries and territories. For more information, visit www.discover.com/company.

A financial summary follows. Financial, statistical, and business
related information, as well as information regarding business and
segment trends, is included in the financial supplement filed as Exhibit
99.2 to the company's Current Report on Form 8-K filed today with the
Securities and Exchange Commission (“SEC”). Both the earnings release
and the financial supplement are available online at the SEC's website (http://www.sec.gov)
and the company's website (https://investorrelations.discover.com).

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements, which speak to our expected business and financial
performance, among other matters, contain words such as “believe,”
“expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,”
“should,” “could,” “would,” “likely,” and similar expressions. Such
statements are based upon the current beliefs and expectations of the
company's management and are subject to significant risks and
uncertainties. Actual results may differ materially from those set forth
in the forward-looking statements. These forward-looking statements
speak only as of the date of this press release, and there is no
undertaking to update or revise them as more information becomes
available.

The following factors, among others, could cause actual results to
differ materially from those set forth in the forward-looking
statements: changes in economic variables, such as the availability of
consumer credit, the housing market, energy costs, the number and size
of personal bankruptcy filings, the rate of unemployment, the levels of
consumer confidence and consumer debt, and investor sentiment; the
impact of current, pending and future legislation, regulation,
supervisory guidance, and regulatory and legal actions, including, but
not limited to, those related to tax reform, financial regulatory
reform, consumer financial services practices, anti-corruption, and
funding, capital and liquidity; the actions and initiatives of current
and potential competitors; the company's ability to manage its expenses;
the company's ability to successfully achieve card acceptance across its
networks and maintain relationships with network participants; the
company's ability to sustain and grow its non-card products; difficulty
obtaining regulatory approval for, financing, closing, transitioning,
integrating or managing the expenses of acquisitions of or investments
in new businesses, products or technologies; the company's ability to
manage its credit risk, market risk, liquidity risk, operational risk,
compliance and legal risk, and strategic risk; the availability and cost
of funding and capital; access to deposit, securitization, equity, debt
and credit markets; the impact of rating agency actions; the level and
volatility of equity prices, commodity prices and interest rates,
currency values, investments, other market fluctuations and other market
indices; losses in the company's investment portfolio; limits on the
company's ability to pay dividends and repurchase its common stock;
limits on the company's ability to receive payments from its
subsidiaries; fraudulent activities or material security breaches of key
systems; the company's ability to remain organizationally effective; the
company's ability to increase or sustain Discover card usage or attract
new customers; the company's ability to maintain relationships with
merchants; the effect of political, economic and market conditions,
geopolitical events and unforeseen or catastrophic events; the company's
ability to introduce new products or services; the company's ability to
manage its relationships with third-party vendors; the company's ability
to maintain current technology and integrate new and acquired systems;
the company's ability to collect amounts for disputed transactions from
merchants and merchant acquirers; the company's ability to attract and
retain employees; the company's ability to protect its reputation and
its intellectual property; and new lawsuits, investigations or similar
matters or unanticipated developments related to current matters. The
company routinely evaluates and may pursue acquisitions of or
investments in businesses, products, technologies, loan portfolios or
deposits, which may involve payment in cash or the company's debt or
equity securities.

Additional factors that could cause the company's results to differ
materially from those described in the forward-looking statements can be
found under “Risk Factors,” “Business - Competition,” “Business -
Supervision and Regulation” and “Management's Discussion and Analysis of
Financial Condition and Results of Operations” in the company's Annual
Report on Form 10-K for the year ended December 31, 2017, and
“Management's Discussion & Analysis of Financial Condition and Results
of Operations” in the company's Quarterly Report on Form 10-Q for the
quarters ended June 30, 2018, and March 31, 2018, which are filed with
the SEC and available at the SEC's internet site (http://www.sec.gov).

DISCOVER FINANCIAL SERVICES

(unaudited, in millions, except per share statistics)

Quarter Ended

September 30,

June 30,

September 30,

2018

2018

2017

EARNINGS SUMMARY

Interest Income

$2,781

$2,636

$2,476

Interest Expense

558

507

426

Net Interest Income

2,223

2,129

2,050

Discount/Interchange Revenue

753

724

675

Rewards Cost

473

461

417

Discount and Interchange Revenue, net

280

263

258

Protection Products Revenue

51

50

55

Loan Fee Income

103

95

95

Transaction Processing Revenue

47

42

43

Other Income

20

24

24

Total Other Income

501

474

475

Revenue Net of Interest Expense

2,724

2,603

2,525

Provision for Loan Losses

742

742

674

Employee Compensation and Benefits

408

400

371

Marketing and Business Development

218

224

203

Information Processing & Communications

89

86

78

Professional Fees

166

161

163

Premises and Equipment

26

24

25

Other Expense

108

89

108

Total Other Expense

1,015

984

948

Income Before Income Taxes

967

877

903

Tax Expense

247

208

301

Net Income

$720

$669

$602

Net Income Allocated to Common Stockholders

$699

$663

$589

PER SHARE STATISTICS

Basic EPS

$2.05

$1.91

$1.59

Diluted EPS

$2.05

$1.91

$1.59

Common Stock Price (period end)

$76.45

$70.41

$64.48

Book Value per share

$32.60

$31.66

$30.56

SEGMENT- INCOME BEFORE INCOME TAXES

Direct Banking

$923

$837

$867

Payment Services

44

40

36

Total

$967

$877

$903

BALANCE SHEET SUMMARY

Total Assets

$105,842

$102,751

$97,608

Total Liabilities

94,826

91,862

86,421

Total Equity

11,016

10,889

11,187

Total Liabilities and Stockholders' Equity

$105,842

$102,751

$97,608

TOTAL LOAN RECEIVABLES

Ending Loans 1, 2

$86,894

$84,789

$80,443

Average Loans 1, 2

$85,855

$83,648

$79,189

Interest Yield

12.45

%

12.28

%

12.15

%

Gross Principal Charge-off Rate

3.63

%

3.78

%

3.26

%

Gross Principal Charge-off Rate excluding PCI Loans 3

3.71

%

3.87

%

3.35

%

Net Principal Charge-off Rate

2.97

%

3.11

%

2.63

%

Net Principal Charge-off Rate excluding PCI Loans 3

3.03

%

3.18

%

2.71

%

Delinquency Rate (30 or more days) excluding PCI Loans 3

2.22

%

2.08

%

2.05

%

Delinquency Rate (90 or more days) excluding PCI Loans 3

1.00

%

0.99

%

0.91

%

Gross Principal Charge-off Dollars

$785

$789

$651

Net Principal Charge-off Dollars

$642

$649

$527

Net Interest and Fee Charge-off Dollars

$135

$138

$107

Loans Delinquent 30 or more days 3

$1,894

$1,725

$1,605

Loans Delinquent 90 or more days 3

$854

$821

$709

Allowance for Loan Loss (period end)

$2,927

$2,828

$2,531

Reserve Change Build/(Release) 4

$100

$93

$147

Reserve Rate

3.37

%

3.34

%

3.15

%

Reserve Rate excluding PCI Loans 3

3.41

%

3.38

%

3.20

%

CREDIT CARD LOANS

Ending Loans

$69,253

$67,812

$63,475

Average Loans

$68,613

$66,594

$62,647

Interest Yield

13.06

%

12.88

%

12.83

%

Gross Principal Charge-off Rate

3.90

%

4.12

%

3.53

%

Net Principal Charge-off Rate

3.14

%

3.34

%

2.80

%

Delinquency Rate (30 or more days)

2.32

%

2.16

%

2.14

%

Delinquency Rate (90 or more days)

1.12

%

1.09

%

1.02

%

Gross Principal Charge-off Dollars

$674

$684

$555

Net Principal Charge-off Dollars

$543

$555

$439

Loans Delinquent 30 or more days

$1,608

$1,466

$1,359

Loans Delinquent 90 or more days

$777

$743

$646

Allowance for Loan Loss (period end)

$2,424

$2,334

$2,091

Reserve Change Build/(Release)

$90

$82

$111

Reserve Rate

3.50

%

3.44

%

3.29

%

Total Discover Card Volume

$39,414

$38,430

$35,581

Discover Card Sales Volume

$35,896

$35,077

$32,161

Rewards Rate

1.31

%

1.31

%

1.30

%

NETWORK VOLUME

PULSE Network

$45,244

$44,308

$39,828

Network Partners

5,113

4,602

3,811

Diners Club International 5

8,370

8,417

7,989

Total Payment Services

58,727

57,327

51,628

Discover Network - Proprietary

36,642

36,339

33,576

Total

$95,369

$93,666

$85,204

1 Total Loans includes Home Equity and other loans.

2 Purchased Credit Impaired ("PCI") loans are loans that
were acquired in which a deterioration in credit quality occurred
between the origination date and the acquisition date. These loans
were initially recorded at fair value and accrete interest income
over the estimated lives of the loans as long as cash flows are
reasonably estimable, even if the loans are contractually past due.
PCI loans are private student loans and are included in total loan
receivables.

3 Excludes PCI loans (described above) which are
accounted for on a pooled basis. Since a pool is accounted for as a
single asset with a single composite interest rate and aggregate
expectation of cash flows, the past-due status of a pool, or that of
the individual loans within a pool, is not meaningful. Because the
Company is recognizing interest income on a pool of loans, it is all
considered to be performing.

4 Allowance for loan loss includes the net change in
reserves on PCI pools having no remaining non-accretable difference
which does not impact the reserve change build/(release) in
provision for loan losses.

5 Volume is derived from data provided by licensees for
Diners Club branded cards issued outside of North America and is
subject to subsequent revision or amendment.